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Potential pitfalls in a commercial real estate lease

On Behalf of | Dec 4, 2022 | Tax Law

You need to thoroughly understand what you are reading before you sign a commercial real estate lease in New York. Many of the items in the agreement may be unfamiliar to you and can result in committing yourself to an unfair or lopsided agreement.

Unfamiliarity with local zoning laws

Most cities establish zoning laws to mandate specific requirements for differing types of commercial properties. For example, medical offices usually need to have an ample number of parking spaces. You may be out of luck if you sign before you do your research. The owner isn’t required to guide you.

Long-term lease commitment

Unlike residential leases, commercial leases are often for three, five or more years. For some types of properties, the term may even exceed 20 years. If you’re a start-up company and want a six-month or one-year lease, be prepared to pay a higher rent because it is a riskier situation for the owner. Don’t be afraid to negotiate. On the other hand, if you’re overly optimistic about your success and sign a three-year lease, you need to have a plan in place if the monthly business income doesn’t cover the rent.

No exit strategy

Plan for the future before you sign a commercial real estate lease. The business may expand faster than you initially thought, and you want more room to grow. On the other hand, you may want the option to leave the premises if things don’t work out. Here are two options you might ask the landlord to add to the lease before you commit.


Subleasing allows a new tenant to move into your space. However, you are responsible for collecting the rent money from them and paying the landlord. The rent payment remains your legal responsibility.


Subletting allows someone else to replace you and sign a new lease with the landlord. This agreement relieves you of any further responsibility.

Read everything before you finalize any commercial real estate agreements.